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Environmental self-auditing by private firms is generally thought to both deserve and require encouragement. Firms can audit themselves more cheaply and effectively than can regulators, but too often are deterred for fear that the information they uncover will be used against them. To reduce this disincentive, the EPA's "Audit Policy" lowers punitive fines when firms promptly disclose and correct violations that they themselves discover. While some contend that the Audit Policy is inadequate, EPA touts its success, presenting as evidence the policy's track record to date. Yet our examination of that track record leads us to question EPA's conclusions. While the policy appears to have encouraged firms to self-audit in a number of instances, a comparison of the violations uncovered in these cases with those detected by standard enforcement practices suggests that the typical self-audited violation is relatively minor. For instance, cases arising under the Audit Policy are more likely to concern reporting violations, rather than emissions. The relative insignificance of self-audited violations raises a number of broader policy questions, including whether the Audit Policy could and should be revised to play a larger role in regulatory enforcement.

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Purpose The purpose of this paper is to examine the effect of falling commodity prices on farm debt usage of corn and soybean farms, and how this debt usage differs based on the financial leverage of the farm. Design/methodology/approach Using panel data on farms surveyed at least twice in the Agricultural Resource Management Survey (ARMS) from 1996 to 2015, this paper uses a difference-in-differences approach to measure the effect of low commodity price shocks on financially vulnerable farms. To account for the correlation in the error structure between the three dependent variables (real estate debt, non-real estate debt, and interest payments) we use a seemingly unrelated regression approach. Findings Following a commodity price shock, financially vulnerable farms (debt-to-asset ratio greater than 40 percent) were found to increase their non-real estate debt when compared with non-financially vulnerable farms. Off-farm business income was found to help farms reduce real estate debt and interest payments in the face of these shocks. Research limitations/implications Data consist of corn and soybean farms surveyed more than once in the ARMS from 1996 to 2015 and are not representative of all US farms, but have similar characteristics to US commercial farms. Social implications The results indicate that financially vulnerable commercial crop farms respond to lower prices by taking on non-real estate debt, increasing financial stress. Well-targeted federal programs could prevent further financial stress for this group. Originality/value This is the first paper to use unbalanced panel data from ARMS to examine how farm debt use responds to commodity prices. This paper can inform policymakers about the financial risks to farms resulting from the current low-price environment.